Debt Lawsuit Defense

Debt Lawsuit Defense

What should I do if I am sued by a debt collector or creditor?

According to the Consumer Financial Protection Bureau, it is important to answer the lawsuit.

https://www.consumerfinance.gov/ask-cfpb/what-should-i-do-if-im-sued-by-a-debt-collector-or-creditor-en-334

However, most consumers and business owners do not know how to correctly respond to a lawsuit, and many make mistakes that are fatal to their case. We have reviewed many answers filed by Pro Se Defendant and have filed countless Amended Answers due to fatal issues, or missing information. If you have been sued by a debt collector or creditor call us today for a free consult.

Unfortunately, millions of people are sued every year for unpaid credit card loan debt. Over the last 11 + years we have defended thousands of debt lawsuits.

If you are being sued for an unpaid debt, do not attempt to handle it on your own. Many people make the mistake of attempting to resolve a debt lawsuit without counsel. This often results in judgments being rendered against them and post judgment collection actions being taken, like the freezing and levying of bank accounts, writs of execution and liens being placed on property.

Original Creditor Lawsuits

We defend lawsuits from original creditors like:

• American Express
• Discover Bank
• Wells Fargo
• Bank of America
• JPMorgan Chase Bank
• Citibank N.A.
• Capital One Bank N.A.
• Synchrony Bank
• One Main Financial
• Conns Appliances
• Navy Federal Credit Union
• TD Bank (Target)
• Credit Unions

3^rd Party Debt Buyer Lawsuits

We Defend Lawsuits from 3^rd Party Debt Buyers like:

• Midland Credit Management
• Midland Funding LLC
• Portfolio Recovery Associates
• LVNV Funding
• Jefferson Capital Systems
• Cavalry SPV I LLC
• Cavalry Portfolio
• Integras Capital Recovery
• Galaxy International Purchasing
• Velocity Investments
• Investment Retrievers
• Westlake Financial
• CKS Prime
• Cascade Capital
• DNF Associates
• Troy Capital
• Unifund
• Red Target
• CACH LLC
• Autovest
• NCEP
• Crown Asset Management

If you have been sued for an unpaid debt, we MAY be able to assist. We handle everything from beginning to end including court appearances, all filings and negotiations. Contact us today for a Free Consultation

Deficiency Balance Cases for Auto Loan Default

A deficiency balance occurs whenever there is a default on a vehicle loan or other secured loan. A deficiency balance is usually the result of a balance remaining after the vehicle or other collateral have been taken to auction and sold for less than what was owed. Many people are unaware that they may be sued for the balance remaining on a defaulted vehicle loan.

What does a typical auto loan deficiency balance look like? Most auto loan deficiency balance lawsuits are the result of a high interest auto loan and or a vehicle that was sold for far more than the value of the vehicle. Auto deficiency lawsuits may happen because someone rolls the negative equity from their previous auto loan into the new loan.

For example: If someone goes to a car dealership to purchase a vehicle and they owe $20,000 on their current auto loan and the car dealership will only give them $15,000 trade in value for the vehicle, there is $5,000 of negative equity that is added to the new auto loan. So let’s look at a quick scenario where many people run into an auto loan deficiency debt.

Scenario: John goes into a car dealership to purchase a new vehicle for his growing family. John and his wife have decided they need an SUV with a third row because their family has grown and they need the space. The current family vehicle is a crossover that has a current trade in value of $15,000. John and his wife owe $20,000 on the vehicle and are concerned about what will happen to the $5,000 difference when they purchase the new vehicle. The Sales Manager for the car dealership assures them that they can simply roll that balance into the new loan. John and his wife are relieved because they really want the new vehicle and are in need of the extra space.

Mr. and Mrs. John, let’s call them the Does for this example pick out an SUV that has a sticker price of $42,000. The vehicle seems to be a few thousand dollars over priced and a bit out of their budget, but Mrs. Doe really wants the new family vehicle and John wants to get it for her. He asks the sales manager if he can get the monthly payment to a comfortable number that the Doe’s can manage. The sales manager works on this and presents the Doe’s with an offer. The Does agree and they move to the Finance Managers office to finalize everything. The Finance Manager ends up selling the Doe’s on getting an Extended Warranty that cost $3,500 and is financed in the auto loan along with Gap Insurance which is another $1,500 which is also financed in the loan. Let’s not forget about that $5,000 that was left over from the previous auto loan.

Once the dealership adds tax, title, license, dealer fees, docs fees the total monthly payment has increased substantially, and is now a bit uncomfortable for the Doe’s. However, they have now been at the Car dealership all day. The kids are hungry and cranky and Mrs. Doe is getting cranky too. John knows he should back out of this deal but he has spent all day at the dealership and does not want to waste the whole day and not end up with a new family vehicle.

Mr. and Mrs. Does sign the papers and driveaway in their slightly used, but new to them SUV with a third row. However, the first payment comes around and it is very high and uncomfortable to make. John decides he will bite the bullet and make some cuts to the budget to make it work. His family deserves the best and he is determined to provide for them. John continues to make the payments work for over 2 years. John walks into work one day to find that the company that he works for is going through rounds of layoffs and he is one of the unfortunate employees who has been cut.

John tries to find new work but it takes him 3-6 months to find comparable employment. In the meantime, he has been working a job that paid significantly less, just to meet the minimum necessities for his family. Unfortunately for the Does, the inflated auto loan did not make the cut and when the Does got 3 months behind on the loan, the vehicle was repossessed. John knows that his credit is going to take a hit for a little while, but is determined to get his credit back up and has been told by friends and family that there is no other recourse for the defaulted auto loan.

John is sitting at home one day when a private process server hands documents to him and lets him know he has been served with a lawsuit. After reviewing the lawsuit documents, John finally looks at the contract from the car dealership which is attached. Here is what he finds:

Sticker Price of Vehicle: $42,000

Extended Warranty: $3,500

GAP Insurance: $1,500

Total: $47,000

Negative equity from previous auto loan (balance of previous auto loan refinanced into new loan): $5,000

Total: $52,000

Title, Registration and all other fees: $1,500

Sales Tax: $3,196

Total: $56,696

Here is where it gets crazy. The Does purchased an SUV that was priced at $42,000 but worth probably $38,000. They are now sitting at $56,696, nearly $20,000 more than the value of the vehicle. However, we have not even added the cost of the auto loan.

The Does Financed the vehicle at 12.5% (many people in this scenario have interest rates much higher such as 16%-20%+)

The Does had to put $1,500 Down and finance the vehicle over 75 months to get the payment to $1,093.04 per month. (they had told the Sale Manager they could afford no more than $900 per month and preferred it to be closer to $800, which he had them close to before adding the Warranty, GAP, TT&L and other fees in the Finance Manager’s office.

John had no idea at the time, but what he became obligated to pay, due to the Cost of Financing was:

Total Cost of Vehicle + Financing (Interest on loan $25,281.98 over the life of the loan

 = $78,477.98

The Does have now obligated themselves to Pay nearly $80,000 for a vehicle with a sticker price of $42,000 that was valued at $38,000.

John Struggles making the $1,093.04 per month payments before losing his job and the vehicle is repossessed.

John paid on the vehicle for 24 of the 75 months and did not realize that the balance owed was still $43,075.84, which is more than the price of the vehicle.

The Lender then took the vehicle to auction. Keep in mind this is a used vehicle that was valued at $38,000 retail when the Does purchased it. It is now valued at Approximately $28,000 retail, however the auction value is approximately half of that.

At auction the lender sales the vehicle for $15,000. The lender then adds cost of retaking the vehicle - $500, selling the vehicle $750 and this makes the total recovered $13,500.

The lender applies this to the $43,075.84 that the Does owed when the vehicle was repossessed leaving a Deficiency Balance of $29,325.84.

The lender then hires a law firm to sue the Does for $29,325.84 + Court Costs $358, Attorney’s fees - $2,500-$3,500 and post judgment interest at the Statutory rate allowed by law (approximately 5%-10% per annum).

If the Does lose the lawsuit they are likely right back up to near the $42,000 original price of the vehicle and within a few years with no vehicle to show for it.

If you have been sued for a Deficiency Balance on a vehicle or other collateralized secured loan Please Contact Us for a Free Consultation.

Common Misconceptions about debt

1. A creditor or 3^rd party debt buyer cannot sue me for a debt.

Unfortunately, many consumers and business owners have been told that creditors cannot sue for an unpaid debt. This is simply incorrect. Whenever a consumer or business owner defaults on a debt they have breached a contract with the lender or credit card company. This Breach of Contract creates a Cause of Action for the Credit Card Company or Lender to sue under.

What if it is a 3^rd Party Debt Buyer? They can’t sue me because I was never in a contract with them, correct? No, unfortunately this is incorrect as well. Whenever an Original Creditor such as a Credit Card Company or Lender decides to sell the debt, the third party debt buyer purchases all the rights to collect on that debt. They purchase the ability to pursue the debt. Within this bundle of rights, they have the right to sue to recover on the debt. However, they still have to prove they are the correct party to bring the lawsuit and this is where 3^rd party debt buyers often have issues.

2. If I ignore the lawsuit and do not accept service the Creditor or Debt Buyer will not be able to proceed with their case against me.

The laws of Civil procedure require that the Plaintiff (in this case, typically, a Creditor or 3^rd party debt buyer.) complete service of process on the Defendant. However, if the Plaintiff is unable to complete service of process, the Plaintiff’s Attorney may file a Motion for Substituted Service with the court and have the documents left at the Defendant’s last known address. Whether or not the Defendant gets the documents, the case will proceed.

3. A creditor cannot freeze my bank accounts because Texas does not allow wage garnishment.

This is inaccurate because current case law says that, once wages are deposited to a bank account the wages are now comingled assets and no longer wages.

4. A creditor cannot put a lien on a my home in Texas. While there are homestead protection laws in Texas that prevent creditors from forcing sell of a debtors homestead due to unpaid credit card debt or debt related judgments, a creditor may file an abstract of judgment, which will typically place a lien on the homestead property. This lien clouds title to the property and prevents the homeowner from getting clear title to property. Texas does provide a remedy to clear title to the property without having to pay the judgment creditor, however, it can be a complex and arduous process, and typically requires the assistance of an attorney and a minimum of 30-45 days to complete.

5. The creditor marked an item as charged-off on my credit report and now they are not going to pursue collection of it and cannot/will not sue me for it.

1. Charge-off is just a designation for credit reporting purposes that indicates that the lender acknowledges that the debtor is not paying the debt and the lender is writing it off as a loss. The debt may be sent for further collections or sold to a third-party. You are still legally obligated to pay the debt.